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Tag: welfare

As has become an annualtradition, my colleague Charles Zakaib has sifted through the data from the latest edition of the International Institute for Strategic Studies’ The Military Balance and created several illuminating charts. They are enclosed below and show U.S. security spending as a share of the global total, U.S. per capita spending as compared with some of our leading allies, and U.S. spending vs. the rest of NATO as a share of GDP.

The data demonstrate that Americans in 2010 spent vastly more in every sense of the term. We accounted for 47.65 percent of global security spending. We each spent more than $2,200 on the Pentagon’s budget, and hundreds more when you factor in other security spending (e.g., Homeland Security, Veterans Affairs, and nuclear weapons). That represents a 72 percent increase in real, inflation-adjusted dollars since 1998, whereas the United Kingdom and Denmark increased by 5 and 6 percent, respectively. Six NATO countries saw per capita spending decline: Italy’s has fallen by 35 percent since 1998; France by 14 percent; and 12 percent in Portugal. The aggregate numbers paint a similar picture: between 1999 and 2010, U.S. spending as a share of GDP rose from 3.15 to 4.77, whereas the rest of NATO declined from 2.05 to 1.61 percent.

The reason why those trends prevail is straightforward: people aren’t inclined to pay for something if someone else is willing to buy it for them. Conservatives understand that dynamic when it applies to housing allowances or food stamps for the less fortunate here in the United States. They ignore it when it applies to buying security for the relatively well off in Europe and Asia.

That blindness is evident in Paul Ryan’s latest budget plan. As Chris Edwards and Tad DeHaven observed earlier this week, Ryan is willing to reduce spending on many domestic programs, but he could have gone much further on the grounds that the federal government does many things that are more appropriately handled by state or local governments or, even better, by the private sector.

Ryan makes an exception for the Pentagon, allowing its budget to grow on top of the massive increases from the past decade. Ryan and others contend that national defense is a core function of government, and therefore should not be treated equally with spending on other programs that are not.

I agree: The Constitution clearly stipulates that the federal government should provide for the “common defence.” It makes no mention of subsidizing mortgages, Amtrak, or sugar. But I anxiously await Rep. Ryan’s explanation for why American taxpayers should be expected to subsidize social welfare spending in other countries. By relieving other governments from their solemn obligation to provide for the common defense of their citizens, we have allowed and encouraged them to divert their resources elsewhere.

That’s the message I came away with after reading an online article from a Philadelphia Inquirer reporter about a decision by the state of Pennsylvania to limit eligibility for food stamps. The article is a perfect example of the difficulty advocates for limited government face in communicating their ideas through the mainstream press.

At issue is the PA Department of Public Welfare’s decision to eliminate eligibility for food stamps for people under the age of 60 who have more than $2,000 in assets (the value of one’s house, retirement benefits, and car would be excluded). The DPW estimates that only “2 percent of the 1.8 million Pennsylvanians receiving food stamps would be affected by the asset test.” Indeed, the DPW’s website notes that “Because of changes to SNAP, most Pennsylvania households are not subject to a net income limit, nor are they subject to any resource or asset limits.”

(SNAP is the acronym for the federal Supplemental Nutrition Assistance Program, which was known as the Food Stamp program until 2008 when Congress changed its name to sound more palatable. The program is run jointly by the U.S. Department of Agriculture and state governments, but federal taxpayers pay for the direct benefits.)

One of the “changes” that the DPW refers to is categorical eligibility, which basically means that Pennsylvania households already receiving benefits from other welfare programs, including cash welfare and Supplemental Security Income, automatically qualify for food stamps. In recent years, both the state of Pennsylvania and the federal government have made it easier to qualify for food stamps benefits.

Unfortunately, the Inquirer reporter either wasn’t aware of these details or didn’t deem them important enough for inclusion. Instead, he quotes ten—let me repeat that, ten—critics of the DPW’s decision. The critics include a “national hunger expert,” the legal director of a “leading anti-hunger group,” the executive director of the Greater Philadelphia Coalition Against Hunger, the executive director of the “liberal Pennsylvania Budget and Policy Center,” and an older woman who says that she’ll “have to give up paying for my health insurance.”

It took me all of two minutes to get a quote from Nathan Benefield, the director of policy analysis at Pennsylvania’s pro-liberty Commonwealth Foundation:

Unfortunately for taxpayers, politicians in Harrisburg and Washington have for the past few years considered it a “success” to have more families on welfare. Pennsylvania welfare eligibility and spending—including for food stamps—has exploded, threatening to crowd out everything else in the state budget. Means testing for assets is a common-sense reform to ensure those who truly need aid get it.

There, was that so hard?

Of course, journalists who are interested in getting the pro-liberty take on welfare reform are welcome to contact my colleagues and me at the Cato Institute. Honestly, we don’t want people to starve in order to save a buck—we just believe that the federal government is an improper and less effective means for assisting those who are truly in need. Pressed for time? Here are Cato essays on food subsidies, welfare, and federal subsidies to state and local government.

But this new video from the Center for Freedom and Prosperity, narrated by an Italian student and former Cato Institute intern, may be the best explanation of what went wrong in Europe and what should happen in the United States to avoid a similar meltdown.

I particularly like the five lessons she identifies.

1. Higher taxes lead to higher spending, not lower deficits. Miss Morandotti looks at the evidence from Europe and shows that politicians almost always claim that higher taxes will be used to reduce red ink, but the inevitable result is bigger government. This is a lesson that gullible Republicans need to learn - especially since some of them want to acquiesce to a tax hike as part of the “Supercommitee” negotiations.

2. A value-added tax would be a disaster. This was music to my ears since I have repeatedly warned that the statists won’t be able to impose a European-style welfare state in the United States without first imposing this European-style money machine for big government.

4. Nations reach a point of no return when the number of people mooching off government exceeds the number of people producing. Indeed, Miss Morandotti drew these two cartoons showing how the welfare state inevitably leads to fiscal collapse.

If I was doing this video, I would have added one more message. If nations want a return to fiscal sanity, they need to follow “Mitchell’s Golden Rule,” which simply states that the private sector should grow faster than the government.

This rule is not overly demanding (spending actually should be substantially cut, including elimination of departments such as HUD, Transportation, Education, Agriculture, etc), but if maintained over a lengthy period will eliminate all red ink. More importantly, it will reduce the burden of government spending relative to the productive sector of the economy.

Unfortunately, the politicians have done precisely the wrong thing during the Bush-Obama spending binge. Government has grown faster than the private sector. This is why this new video is so timely. Europe is collapsing before our eyes, yet the political elite in Washington think it’s okay to maintain business-as-usual policies.

Another remarkable finding in the video is that poor people in America rarely suffer from material deprivation. Indeed, they have wide access to consumer goods that used to be considered luxuries - and they also have more housing space than the average European (and with Europe falling apart, the comparisons presumably will become even more noteworthy).

The most important message of the video, however, is that small government and economic freedom are the best answers for poverty. As Hadley explains, poor people can be liberated to live meaningful, self-reliant lives if we can reduce the heavy burden of the federal government.

Last but not least, the video doesn’t address every issue in great detail, and there are three additional points that should be added to any discussion of poverty.

This last point is worth emphasizing because it is also one of the core messages of the video. The federal government has done a terrible job dealing with poverty. The time has come to get Washington out of the racket of income redistribution.

There are now a record number of poor people in America, and the poverty rate has jumped to 15.1 percent.

But I don’t really blame President Obama for these grim numbers. Yes, he’s increased the burden of government, which doubtlessly has hindered the economy’s performance and made things worse, but the White House crowd legitimately can argue that they inherited a crummy situation.

What’s really striking, if we look at the chart, is that the poverty rate in America was steadily declining. But then, once President Lyndon Johnson started a “War on Poverty,” that progress came to a halt.

As I’ve explained before, the so-called War on Poverty has undermined economic progress by trapping people in lives of dependency. And this certainly is consistent with the data in the chart, which show that the poverty rate no longer is falling and instead bumps around between 12 percent and 15 percent.

This is bad news for poor people, of course, but it’s also bad news for taxpayers. The federal government, which shouldn’t have any role in the field of income redistribution, has squandered trillions of dollars on dozens of means-tested programs. And they’ve arguably made matters worse.

By the way, just in case you think I’m being too easy on Obama, read this post about how the Administration is considering a terrible plan to re-define poverty in order to justify ever-larger amounts of redistribution.

I fully agree that the president’s policies definitely have made—and will continue to make—matters worse. But the fundamental problem is 40-plus years of a misguided “War on Poverty” by the federal government.

David Boaz’s post on bizarre and utterly preposterous claims that the federal government’s “social safety net” has been shrinking brought to my mind James Madison’s position that “Charity is no part of the legislative duty of the government.”

“The Father of the Constitution” wasn’t being cold-hearted when he took this position during a 1794 debate in the House of Representatives over federal aid to refugees. Rather, he was merely recognizing that “the government of the United States is a definite government, confined to specified objects.” Charity just wasn’t one of the specified objects. Of course, future politicians decided otherwise.

Today, most young Americans grow up in federally subsidized schools offering federally subsidized meals. They are inculcated to view the federal government as a benevolent caregiver that exists to provide Americans with housing, food, health care, and even income (to name just a few). Madison’s unfortunately quaint notion that the federal government isn’t supposed to be engaged in “charitable” activities would probably leave them dumbfounded.

I single out children because this week a private charity that I am involved with, the Purple Feet Foundation, is giving select inner-city sixth graders an opportunity to take hold of their futures now. Instead of promoting dependency, these kids will spend the week engaged in educational activities that will hopefully inspire them to utilize their individual talents to succeed in life. The Foundation does not seek, nor will it accept, taxpayer money. I believe this sets a good example for these kids.

Those of us who desire the limited federal government that Madison envisioned are often accused of being uncaring about those who are in need. In fact, the opposite is the truth: we recognize that government programs are wasteful, ineffective, and counterproductive to the aims that they are trying to achieve. As a Cato essay on federal welfare explains, private charity is superior to government programs for several reasons:

Private charities are able to individualize their approaches to the circumstances of poor people. By contrast, government programs are usually designed in a one-size-fits-all manner that treats all recipients alike. Most government programs rely on the simple provision of cash or services without any attempt to differentiate between the needs of recipients.

The eligibility requirements for government welfare programs are arbitrary and cannot be changed to fit individual circumstances. Consequently, some people in genuine need do not receive assistance, while benefits often go to people who do not really need them. Surveys of people with low incomes generally indicate a higher level of satisfaction with private charities than with government welfare agencies.

Private charities also have a better record of actually delivering aid to recipients because they do not have as much administrative overhead, inefficiency, and waste as government programs. A lot of the money spent on federal and state social welfare programs never reaches recipients because it is consumed by fraud and bureaucracy…

Another advantage of private charity is that aid is much more likely to be targeted to short-term emergency assistance, not long-term dependency. Private charity provides a safety net, not a way of life. Moreover, private charities may demand that the poor change their behavior in exchange for assistance, such as stopping drug abuse, looking for a job, or avoiding pregnancy. Private charities are more likely than government programs to offer counseling and one-on-one follow-up, rather than simply providing a check.

In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point of no return when the people riding in the welfare wagon begins to outnumber the people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving public pensions, etc.), it becomes difficult for taxpayers to form a majority coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

The welfare state starts with small programs targeted at a handful of genuinely needy people. But as politicians figure out the electoral benefits of expanding programs and people figure out that they can let others work on their behalf, the ratio of producers to consumers begins to worsen.

Then things get really interesting. Small nations like Greece can rely on bailouts from bigger countries and the IMF, but sooner or later, as larger nations begin to go bankrupt, that approach won’t be feasible.

I often conclude my speeches by joking with the audience that it’s time to stock up on canned goods and bottled water. Many people, I’m finding, don’t think that line is very funny.